Definitions and Basics

The term entrepreneur, which most people recognize as meaning someone who organizes and assumes the risk of a business in return for the profits, appears to have been introduced by Richard Cantillon (1697-1734), an Irish economist of French descent. The term came into much wider use after John Stuart Mill popularized it in his 1848 classic, Principles of Political Economy, but then all but disappeared from the economics literature by the end of the nineteenth century….

In the News and Examples

John Allison, CEO of BB&T Bank, lays out his business philosophy arguing for the virtues of profits, self-interest and production. His definition of justice, one of the core values of his firm, is that those who produce more, get more. He argues that Bill Gates would do more for the world improving Microsoft than running his foundation and giving away money. Allison praises Atlas Shrugged and refuses to let his bank make loans to companies that use eminent domain to acquire property. Is this any way to run a company? Does Allison really run his company this way? How does he deal with the gap between his philosophy and our popular culture’s view of business and profits? Listen as Allison and host Russ Roberts discuss BB&T’s unusual business strategy….

Author and journalist Virginia Postrel talks about how business competes for customers using style and beauty, going beyond price and the standard measures of quality. She looks at the role of appearance in our daily lives and the change from earlier times when style and beauty were luxuries accessible only to the wealthy. She also talks about her donation of a kidney to a friend and how that affected the intensity of her feelings about the policies surrounding organ donations….

You set up shop on a sidewalk or in front of a house or business. You have at least one pitcher of ice-cold lemonade, and you’re offering it to anyone who walks by—for a very low price. You most likely got the lemonade from someone in your family, so you don’t really have any costs. So, everything you make is pure profit. If you sell your lemonade for 10 cents a glass, then you need to sell only 10 glasses to make a dollar. Sell about 50 glasses and you’ll have enough to see that cool new summer movie or buy that great new book or video game….

But what about that 10 cents you’re charging? Could it be more? You might charge 50 cents a glass. You might also end up like the boy in the graphic at right: He’s very sad because no one is buying his lemonade. Why? He’s charging too much….

A Little History: Primary Sources and References

Intrigue, murder, posthumous plagiarism, citations by Adam Smith, rediscovery by William Stanley Jevons a century later, and a stunning work on entrepreneurial risk, money, foreign exchange, and banking from the 1700s—what more could one ask for from an 18th century economist? Richard Cantillon offers fascination for historians and economists as much in death as he did in life….

We’ve left Higgs’s translation intact; but note that his arcane translations of some words like “Undertaker” for “entrepreneur” obscured Cantillon’s apparent coining of the word “entrepreneur”—see Mark Casson’s article, Entrepreneurship, in the Concise Encyclopedia of Economics for more on this…. [Econlib Editor’s Notes]

Schumpeter was among the first to lay out a clear concept of entrepreneurship. He distinguished inventions from the entrepreneur’s innovations. Schumpeter pointed out that entrepreneurs innovate, not just by figuring out how to use inventions, but also by introducing new means of production, new products, and new forms of organization. These innovations, he argued, take just as much skill and daring as does the process of invention….

Advanced Resources

The particular technical contribution to the theory of free enterprise which this essay purports to make is a fuller and more careful examination of the rôle of the entrepreneur or enterpriser, the recognized “central figure” of the system, and of the forces which fix the remuneration of his special function….